Thank you 1 Which of the following are ways to finance a government budget deficit (Check all that apply ) A Reduced interest rates B Higher private savings C Lower private investment D Higher capital inflows from abroad 2 The main reason for the projected increases in the U S budget deficit in coming years is the A escalating size of entitlement programs such as Social Security and Medicare B decrease in net interest payments C increasing size of the trade deficit D reduction in tax collections The current fiscal policy of the federal government is unsustainable due to A diminishing interest payments in the future by countries owing debt to the United States B increased government revenue expected in the future C increased government expenditure on entitlement programs D decreased net interest payments 3 The government's budget deficit is best represented by which of the following equations A Budget deficit Government purchases of goods and services Transfer payments Interest payments on existing debt Seigniorage B Budget deficit Government purchases of goods and services Interest payments on existing debt Newly issued government bonds Seigniorage Transfer payments Tax revenue C Budget deficit Government purchases of goods and services Transfer payments Tax revenue Interest payments on existing debt D Budget deficit Government purchases of goods and services Transfer payments Tax revenue Newly issued government bonds 4 What does it mean to say that fiscal policy is sustainable A A fiscal policy is sustainable if the real interest rate is greater than the growth rate of real GDP B A fiscal policy is sustainable only if the government has a primary deficit of zero C A fiscal policy is sustainable if it leads to a constant or decreasing debt to GDP ratio D All of the above 5 Suppose the government cuts taxes by $300 million dollars this year and must pay off its debt next year by increasing taxes by $300 million According to Ricardian equivalence, consumption spending will this year and next year, all else equal A not change not change B increase by $150 million decrease by $150 million C increase by $300 million not change D increase by $300 million decrease by $300 million 6 If the federal government tries to make fiscal policy sustainable by increasing taxes on capital income, the aftertax return to capital goods will and will result in potential GDP A decrease lower B decrease higher C decrease higher D increase lower

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Thank you 1. Which of the following are ways to finance a government budget deficit? (Check all that apply.) A. Reduced interest rates. B. Higher

Thank you

Which of the following are ways to finance a government budget deficit? (Check

all that apply.)

Reduced interest rates.

Higher

private savings.

Lower private investment.

Higher

capital inflows from abroad.

The main reason for the projected increases in the U.S. budget deficit in coming years is the:

escalating size of entitlement programs such as Social Security and Medicare.

decrease in net interest payments.

increasing size of the trade deficit.

reduction in tax collections.

The current fiscal policy of the federal government is unsustainable due to:

diminishing interest payments in the future by countries owing debt to the United States.

increased government revenue expected in the future.

increased government expenditure on entitlement programs.

decreased net interest payments.

The government's budget deficit is best represented by which of the following equations?

Budget deficit = Government purchases of goods and services + Transfer payments + Interest payments on existing debt + Seigniorage

Budget deficit = Government purchases of goods and services + Interest payments on existing debt + Newly issued government bonds + Seigniorage + Transfer payments

Tax revenue

Budget deficit = Government purchases of goods and services + Transfer payments

Tax revenue + Interest payments on existing debt

Budget deficit = Government purchases of goods and services + Transfer payments + Tax revenue+ Newly issued government bonds

What does it mean to say that fiscal policy is sustainable?

A fiscal policy is sustainable if the real interest rate is greater than the growth rate of real GDP.

A fiscal policy is sustainable only if the government has a primary deficit of zero.

A fiscal policy is sustainable if it leads to a constant or decreasing debt-to-GDP ratio.

All of the above.

Suppose the government cuts taxes by $300 million dollars this year and must pay off its debt next year by increasing taxes by $300 million. According to Ricardian equivalence, consumption spending will ________ this year and ________ next year, all else equal.

not change; not change

increase by $150 million; decrease by $150 million

increase by $300 million; not change

increase by $300 million; decrease by $300 million

If the federal government tries to make fiscal policy sustainable by increasing taxes on capital income, the aftertax

return to capital goods will ________ and will result in ________ potential GDP.

decrease; lower

decrease; higher

increase; lower